A recent report, The Food Retail Industry Speaks, What Are They Saying?, issued by the Food Marketing Institute (FMI) looks at the biggest concerns and areas for growth and optimism of food retailers. The information is based on the responses of 107 food retailing companies, covering 36,000 retail stores in the U.S. and Canada.
FMI asked retailers about a range of issues to understand how and how much they affect the ability of food retailers to generate sales and profit.
In a recent webinar, Leslie Sarasin, President and CEO of the FMI, provided a summary of the report’s findings. Here are some highlights from one part of the report — the Food Retail Pulse that looks at the good, the bad, the blurry, and the new issues affecting food retailers.
The following issues are having positive effects on retailer sales and profits:
- The trends of health/well-being and food as medicine.
- Changing consumer behaviors around food consumption. These changes include healthy eating, diet trends like paleo and keto, various forms of foodservice, meat substitutes, the growth of private brands, and online shopping.
- Shoppers’ demand for transparency. This has emerged in recent years as having a positive impact due to food retailers’ ability to respond effectively.
The following issues are having negative effects on retailer sales and profits:
- Expenses. The two biggest concerns are the cost of health care benefits and credit/debit card interchange fees.
- Competition. Retailers have increased competition from traditional food retailers, non-traditional food retailers, and online retailers. Many stores also feel pressure from restaurants and foodservice, along with food companies selling directly to consumers.
- Labor. Personnel issues include upward wage pressure, including minimum wage increases and bonuses, and the ability to attract and retain quality employees.
The food retail pulse identifies the following issues as blurry:
- The economy. The local and national economies continue to have a beneficial impact for more than half of responding food retailers. But 40% said the economy has a negative effect on their businesses. Sarasin explained, “On one hand, a strong economic picture has consumer confidence up, with shoppers generating more sales and revenue. However, on the other hand, the low unemployment picture and upward wage pressures are exerting a negative influence on profit.”
- Technology. The rapid evolution and implementation of technology has become more central to food retailers’ success. The good news is technology can boost performance on the operational side and enhance engagement with customers. However, leveraging emerging technologies isn’t cheap and has a steep learning curve for most retailers.
This year’s survey also turned up three new issues of increasing concern to food retailers:
- Trucking and transportation capacity. Companies find it challenging to attract enough food truck drivers and to interest younger generations in joining this sector of the workforce.
- International trade and tariffs. “This volatile topic has created concerns about availability and pricing of products, often challenging retailers to shift sourcing strategies for product,” said Sarasin.
- Pharmacy DIR (direct and indirect remuneration) fees. This issue is having a significant negative impact on food retailers with pharmacies. Supply chain intermediaries collect these fees retroactively from pharmacies. FMI is heavily involved in efforts at the congressional level to reform DIR fees.
Despite the challenges facing food retailers, they continue to express optimism about financial performance. More than half of retailers feel strongly their same store sales will grow again this year. While 31% of retailers believe net profit will increase, 39% expect increased online sales. Retailers are also optimistic about increased basket sizes but are less certain whether shopper trip frequency will increase.
Sarasin concluded the webinar by noting that although the food retail industry continues to face a range of challenges, food retailers are using proactive success strategies to move forward and overcome the roadblocks. In the process, food retailers are learning how to succeed in just about any environment.